35 Independent Auditors Report. 41 Statements of Financial Position. 43 Consolidated Statement of Changes in Equity

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3 Table of Contents 2 Corporate Information 35 Independent Auditors Report 3 Chairman s Statement 4 Profile of Directors and Key Senior Management 39 Statements of Profit or Loss and Other Comprehensive Income 41 Statements of Financial Position 7 Management Discussion and Analysis 43 Consolidated Statement of Changes in Equity 11 Statement on Corporate Governance 44 Company Statement of Changes in Equity 22 Audit Committee Report 45 Statements of Cash Flows 24 Statement on Risk Management and Internal Control 27 Additional Compliance Information 28 Statement on Corporate Social Responsibilities 29 Statement of Directors Responsibilities 30 Directors Report 47 Notes to the Financial Statements 88 Properties Owned by the Group 89 Analysis of Shareholdings 91 Notice of Annual General Meeting 94 Statement Accompanying Notice of Annual General Meeting 34 Statement by Directors Annexure A 34 Statutory Declaration Form of Proxy

4 2 Corporate Information BOARD OF DIRECTORS Tan Sri Dato Ng Boon Ng Thian Hock Executive Chairman Dato Setia Abdul Halim Bin Dato Haji Abdul Rauf Executive Deputy Chairman Dato Milton Norman Ng Kwee Leong Managing Director Tan Sri Dato Dr. Sak Cheng Lum Independent Non-Executive Director Mat Ripen Bin Mat Elah Independent Non-Executive Director Ooi Hock Guan Independent Non-Executive Director Malcolm Jeremy Ng Kwee Seng Executive Director COMPANY SECRETARIES Bernard Lim Boon Siang (MACS 01153) Teoh Yar Ley (MIA 29224) REGISTERED OFFICE Lot 3, Jalan Lada Sulah 16/11, Section Shah Alam, Selangor D.E Tel: Fax: SHARE REGISTRARS Tricor Investor & Issuing House Services Sdn. Bhd. Unit 32-01, Level 32, Tower A Vertical Business Suite, Avenue 3, Bangsar South No. 8, Jalan Kerinchi, Kuala Lumpur Tel: Fax: Tricor s Customer Service Centre Unit G-3, Ground Floor Vertical Podium Avenue 3, Bangsar South No. 8, Jalan Kerinchi, Kuala Lumpur AUDITOR Cheng & Co Chartered Accountants No. 8-2 & 10-2, Jalan 2/114, Kuchai Business Centre Off Jalan Klang Lama, Kuala Lumpur Tel: Fax: customerservice@chengco.com.my PRINCIPAL BANKERS Hong Leong Bank Berhad Public Bank Berhad OCBC Bank (Malaysia) Berhad United Overseas Bank (M) Bhd. CIMB Bank Berhad STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad Transferred from Second Board to Main Board on 21st September 2016 Stock Name: HIL Stock Code: 8443

5 3 Chairman s Statement Dear Valued Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report of HIL Industries Berhad ( HIL or the Group ) for the financial year ended 31 st December The Company & its Performance Highlights During the financial year under review, the Group recorded revenue of RM million and profit before tax of RM million, representing a decrease of approximately RM million or 18.96% and RM2.464 million or 9.93% respectively as compared to revenue of RM million and profit before tax of RM million in the preceding financial year. This was primarily due to the weakened global and domestic economy. For the period under review, the Group registered a basic earnings per share attributable to the shareholders of 5.92 sen, a decrease of 0.30 sen from the corresponding year, whilst net asset per share for the Group is RM1.31, an increase of RM0.21 compared to preceeding financial year. Our financial position remains strong with a net cash position of RM million, an increase of RM million. This will enable us to proceed with our expansion plans for our property division, to finance our ongoing projects as well as looking for opportunites to add more land bank for development. Dividends The Board of Directors has recommended a first and final single tier dividend of 3% or 1.5 sen per ordinary shares of RM0.50 each in respect of the financial year ended 31 st December The dividend payment is subject to the shareholders approval at the forthcoming 47 th Annual General Meeting. Appreciation On behalf of the Board, I would like to express my sincere appreciation to all valued and loyal shareholders, customers, suppliers, business partners, and bankers for their support and confidence in the Group. My appreciation also goes to the Board of Directors of the Company and the management and staff of the Group for their dedication and continued commitment to improve the overall performance of the Group. Tan Sri Dato Ng Boon Ng Thian Hock Chairman April 2017

6 4 Profile of Directors and Key Senior Management TAN SRI DATO NG BOON NG THIAN HOCK Executive Chairman (Key Senior Management) Malaysian, male, aged 69, was appointed to the Board on 7 th February 2003 as an Executive Director and has been Executive Chairman since 4 th July Tan Sri Dato Ng graduated with an Honours Degree in Civil Engineering from the University of Malaya. He is the founder of the A&M Realty Berhad s Group of companies. He began his career in 1970 as an engineer in Perbadanan Urus Air Selangor Berhad before being appointed as a Municipal Councilor for the Selangor Government, State Assemblyman for the Barisan Nasional Party for the Selat Klang and Pandamaran constituencies and a Senator for the Government. Tan Sri Dato Ng is also the Executive Chairman of A&M Realty Berhad. Tan Sri Dato Ng is a substantial shareholder of HIL. He is also the father of Dato Milton Norman Ng Kwee Leong, the Managing Director and Malcolm Jeremy Ng Kwee Seng, the Executive Director of HIL. Tan Sri Dato Ng does not have any conflict of interest with the Company. DATO SETIA ABDUL HALIM BIN DATO HAJI ABDUL RAUF Executive Deputy Chairman Malaysian, male, aged 79, was appointed to the Board on 7 th February 2003 as an Executive Director and has been Executive Deputy Chairman since 4 th July Dato Setia Abdul Halim holds a Bachelor of Arts Degree from the University of Malaya and Masters Degree in Public and International Affairs from the University of Pittsburgh, USA. Before joining the private sector, he held key positions in government authorities and agencies among which included Director-General of Implementation Coordination Unit in the Prime Minister s Department, State Secretary of the State Government of Selangor, Director-General of Immigration Department Malaysia, Deputy Director of Bureau of Research and Consultancy, National Institute of Public Administration, Malaysia and Senior Deputy Director-General of the Rubber Industry Smallholders Development Authority. He has vast experience in management and strategic business planning. He is Chairman of Kontena Nasional Global Logistics Sdn Bhd and the Executive Deputy Chairman of A&M Realty Berhad. Dato Setia Abdul Halim does not have any interest in the securities of the Company and does not have any family relationship with any Director and/or major shareholder of the Company.

7 5 Profile of Directors and Key Senior Management DATO MILTON NORMAN NG KWEE LEONG Managing Director (Key Senior Management) Malaysian, male, aged 46, was appointed to the Board on 3 rd July 1999 as Managing Director. He is a member of the Nomination Committee and Remuneration Committee. Dato Milton graduated with an Honours Degree in Law from the University of Western Australia in After graduating, he spent 9 months doing his pupilage in the legal office of Shearn Delamore and was admitted to the Malaysian Bar as an Advocate and Solicitor in May He spent a further 6 months in Shearn Delamore before joining HIL in December 1995 as general manager where he was responsible for the day-to-day operations of the Company. Dato Milton is a substantial shareholder of the Company by virtue of his parents shareholdings. He is the son of Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman of HIL. He is also a Director in A&M Realty Berhad. Dato Milton does not have any conflict of interest in the Company. MALCOLM JEREMY NG KWEE SENG Executive Director (Key Senior Management) Malaysian, male, aged 31, was appointed to the Board on 8 th September 2008 as an Executive Director. Mr. Malcolm graduated with double Degrees majoring in Accounting and Law from Murdoch University, Western Australia in After graduating he had spent a brief period in MIMB Investment Bank Bhd before joining HIL. He currently oversees the finance and accounting operations of the Group. Mr. Malcolm is a substantial shareholder of the Company by virtue of his parents shareholdings. He is the youngest son of Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman of HIL and the youngest brother to Dato Milton Norman Ng Kwee Leong, Managing Director of the Company. He is also a Director in A&M Realty Berhad. Mr. Malcolm does not have any conflict of interest in the Company. TAN SRI DATO DR. SAK CHENG LUM Independent and Non-Executive Director Malaysian, male, aged 73, was appointed to the Board on 16 th February 2007 as an Independent Director. He is a member of the Audit Committee. Tan Sri Dato Dr. Sak Cheng Lum graduated with a Degree in Medicine from the University of Singapore in 1968 and served as a medical officer in the government service before going into private practice. His commitments to the nation can be seen from his former appointments including his election as the State Assemblyman under Barisan Nasional party for the seat of Bagan Jermal in Penang, appointment as Penang State Executive Councilor, Senator and Parliamentary Secretary of Ministry of Domestic Trade and Consumer Affairs. Tan Sri Dato Dr. Sak is also an Independent Director of A&M Realty Berhad, Xinghe Holdings Berhad and Chairman of the Board of Trustees of UTAR Education Foundation. He has on 31 st August 2016 resigned all his posts in Xinghe Holdings Berhad. He does not have any interest in the securities of the Company and does not have any family relationship with any Director and/or major shareholder of the Company.

8 6 Profile of Directors and Key Senior Management MAT RIPEN BIN MAT ELAH Independent and Non-Executive Director Malaysian, male, aged 77, was appointed to the Board on 20 th February 2004 as an Independent Director. He is a member of the Audit Committee, Nomination Committee and Remuneration Committee. Tuan Mat Ripen graduated from National Chengchi University Taiwan with a Bachelor of Law (Taiwan). He served in various capacities in UMNO, and was formerly a political secretary to the Chief Minister in Selangor. He is also a Director of A&M Realty Berhad. He does not have any interest in the securities of the Company and does not have any family relationship with any Director and/or major shareholder of the Company. OOI HOCK GUAN Independent and Non Executive Director Malaysian, male, aged 51, was appointed to the Board on 26 th February 2009 as an Independent Director. He is a member of the Audit Committee, Nomination Committee and Remuneration Committee. Mr. Ooi graduated with a Degree in Economics from the University of Leicester, United Kingdom and is a Professional Member of the Institute of Internal Auditors Malaysia. After graduating he has spend a total of 14 years with Royal Selangor Pewter and GCH Retail (Malaysia) Sdn Bhd (Giant Hypermarket) specialising in Internal Audit and Finance before joining HIL. Mr. Ooi is also a Director for A&M Realty Berhad. He does not have any interest in the securities of the Company and does not have any family relationship with any Director and/or major shareholder of the Company. OTHER INFORMATION ON DIRECTORS AND KEY SENIOR MANAGEMENT Saved as disclosed, none of the Directors and key senior management has any conflicts of interest with the Company and none has convicted of any offences (other than traffic offences) in the past five years.

9 7 Management Discussion and Analysis Introduction With over 40 years experience in the plastic injection industries, HIL enjoys the reputation of being a leading one-stop custom injection moulder of engineering plastics in South East Asia. HIL began operations in Malaysia in 1969 as Hagemeyer Industries (M) Sdn. Bhd., a Dutch company involved in the manufacturing and trading of BIC ball pens. In 1989, following a management buyout, the name of the Company was changed to Hil Industries Sdn. Bhd.. It was subsequently converted to a public listed company on the 10 th June 1991 and listed on the KLSE on the 28 th January HIL obtained the ISO 9002 accreditation in 1991 and was in actual fact, the first plastic injection moulder to attain it in Malaysia. Other quality management and environmental control system compliances certifications obtained by HIL are QS9000 in 2003, TS16949 in 2004, ISO14001 in 2007 and OHSAS in HIL has also been an approved manufacturer with Underwriters Laboratories USA since HIL s main factory is located on a 7 acre site in Jalan Lada Sulah 16/11, Section 16 Shah Alam and houses the injection moulding, mould making, robotic spray painting and metal stamping divisions. In 1998, HIL s operations commenced at its second factory in Jalan Bukit Kemuning, Shah Alam. This factory has a built-up area of over 10,000 square metres and consists of a large assembly plant together with facilities for a unique surface decoration or coating technology as well as blow injection-molding facilities. HIL set up its third factory in Malaysia in 2007 with a builtup area of 3,000 square metres at the Prai Industrial Estate Free Trade Zone in Penang. This factory offers injection moulding, robotic spray painting and sub-assemblies services to provide better support to OEMs in the northern area. HIL s first foray into the overseas market began in 2006 with the set up of its plant in Suzhou, China. With over 8,000 square metres of built up factory, this plant offers a one-stop plastic solution provider for the information technology industry offering mould making, injection molding, spray painting and various unique decoration technologies as well as sub-assemblies. HIL s products can be found in various industries, ranging from the automotive, consumer electronics, IT related as well as industrial. Our customers consists of well recognized brand names Multi-Nationals where quality, cost and delivery are a must. As such, HIL continuously strives for total commitment and customer satisfaction, employing various manufacturing in our pursuit for manufacturing excellence. As a one-stop plastic solution provider, our dedicated team will ensure that all our customers requirements are met and that our products are of the highest quality right from product design, procurement of raw materials and child parts, mould design and manufacture right up to the final assembly and testing of the product. In an effort to grow and diversify its earnings base, HIL through its subsidiaries, has ventured into property development. The group primarily focuses on affordable housing and especially in the Klang Valley area. Business Operation Review Manufacturing Division Our manufacturing division registered a decrease in revenue mainly due to lower sales volume from our major customers subsequent to the slowdown in the general market condition and cautious consumer sentiment for both our Malaysia and overseas subsidiary s products. The Malaysian automotive sales experienced a slowdown in On the whole, the Group s automotive industry is quite dependent on the overall sales of our 2 national cars and also the non-national brands. The uncertain economic conditions have affected customers spending. Our overseas operations in China recorded a decrease in results, but better efficiency and other cost saving activities has helped soften the impact from the drop in revenue. We have secured some new projects but those have yet to start production and hence have not contributed to the Group s earnings in the financial period under review. Property Division HIL launched two property projects in Shah Alam namely Kemuning Greenhills and Kemuning Hijauan II, which were very successful and expect to do equally well with its latest project namely the Kemuning Greenhills. In 2016, the revenue was mainly contributed from our two completed projects namely Kemuning Greenhills consisting of 56 units of cluster Semi-D and Kemuning Hijauan II consisting of 116 units of terraced houses. Both projects have been completed and handed over to purchaser during the financial year ended 31 st December HIL is confident that our next project after the successful Kemuning Hijauan II, that is Kemuning Hijauan III which is adjacent to Kemuning Hijauan II will be able to contribute positively to the Group s performance.

10 8 Management Discussion and Analysis In the meantime also, HIL will continue to expand its property business especially focusing in the affordable range of housing and centered in the Klang valley area. HIL will continue to source and look out for opportunities to obtain more development land within the Klang valley to ensure the continuous growth for this business segment. Kemuning Greenhills Highway (LKSA), KESAS Highway, ELITE Highway, LDP and Federal Highway. The sales launch of this property with affordable prices was successfully launched on 16 th May, 2016 with encouraging responses from prospective purchasers. Kemuning Hijauan III Artist impression of Kemuning Greenhills Kemuning Greenhills is a freehold luxury 2-storey cluster Semi Ds. It comprises of 64 units of semi-detached houses with a land area from 32 x 70 and a built-up of approximately 2,300 sq feet. QUADZ is sited amidst the vibrant townships of Kota Kemuning and Bukit Rimau. It offers a unique lifestyle that allows you to enjoy luxurious and harmonious living in a serene neighbourhood at Kemuning Greenhills. Artist impression of Kemuning Hijauan III Kemuning Hijauan Kota Kemuning comprises of 108 units of 2-storey terraced houses, which is a continuation of Kemuning Hijauan II, and we plan to launch this project in the final quarter of The units have built-ups ranging from 1,470 sq ft to 1,730 sq ft with affordable prices. Financial Review Designed for maximized built-up and cocooned in a guarded enclave, this perfect abode is also nearby a host of amenities. Savour short drives to hypermarket for your daily groceries, Chinese Taipei International School, Chung Hua Primary School, Columbia Asia Hospital and a host of F&B outlets. Kemuning Greenhills is located in a strategic location where it enjoys speedy access to key locations via a major network of highways namely Kemuning Shah Alam

11 9 Management Discussion and Analysis Revenue For financial year ended 31st December 2016, the Group recorded revenue of RM million compared to revenue of RM million in previous financial year. This represented a decrease in revenue of RM million or 18.96%. The decrease is mainly from manufacturing division. Lower sales volume subsequent to the slowdown in automotive market has reduce the Malaysia s sales in this division by RM million or 23.97%. As for manufacturing division in China, the sales are also affected by the global weak economic conditions. Stiff price competition among the manufacturers in China has also affected our sales in China by RM3.591 million or 30.19%. As for the property division, there is a marginal drop in revenue of RM1.220 million or 3.43% subsequent to the completion of our two projects at Bukit Kemuning. Profit attributable to owners of the Company The profit after tax attributable to owners of the Company decrease by 4.74% from RM million in the previous financial year to RM million in the current financial year. Liquidity The Group s cash position increased from RM million as at 31 st December 2015 to RM million as at 31 st December Net cash generated from operations was RM million of which approximately RM0.845 million was used for capital expenditure and RM4.149 million for payment of dividend. HIL is confident that its existing financial stand is sufficient to finance its capital expenditure and working capital requirements under its current and new development plans. Gearing The Group s borrowing is solely for hire purchase. Total hire purchase loan decrease from RM1.581 million as at 31 st December 2015 to RM1.120 million as at 31 st December Dividend In respect of the financial year ended 31 st December 2015 as reported in the Director s report of that year, a first and final single tier dividend of 3% or 1.5 sen per ordinary share of RM0.50 each amounting to RM4,149,258 was paid on 18 th August At the forthcoming Annual General Meeting, a first and final single tier dividend in respect of the financial year ended 31 st December 2016 of 3% or 1.5 sen per share on 276,617,344 ordinary shares, amounting to a dividend payable of RM4,149,260 will be proposed for shareholders approval. Profit Before Tax The Group recorded a profit before tax of RM million for the financial year ended 31st December 2016, this represented a decrease of RM2.464 million or 9.93% compared to The decrease is mainly attributed from the slower demand from our customer. Various cost saving planning and control has been implemented in order to control the overall cost especially under such tough economic conditions. Outlook Moving forward, the economy in 2017 does not appear to be encouraging due to the challenging global economic and financial landscape. The changing in consumer behaviour, spending habits and saving intentions is expected to affect the sales of automotive industry. The Group will persevere in its business initiatives to secure more projects, continuously looking for new business opportunities and to streamline it s manufacturing process to achieve cost optimization through greater efficiency.

12 10 Management Discussion and Analysis As for property division, the property market is expected to remain soft in 2017 mired by issues such as unaffordability, bank tightening in mortgage facilities and macro-economic issues such as rising living costs and smaller growth in incomes. The increasing living cost and economic uncertainties have led to an upswing in worries about job security, resulting in more cautious consumer spending. We expect the demand for affordable housing to pick up as people are becoming more realistic about their expectation. This is in line with our Group s direction of expanding our property business especially focusing in the affordable range of housing. The management is confident that Kemuning Hijauan III will contribute satisfactory to the Group s performance as we are developing landed houses that are within the affordable range in Klang Valley. Besides this, the Group will continue to look for new lands at strategic locations for future developments and the possibility of joint ventures with some good partners in developing more projects. Hence, The Group recently entered into two conditional share sale agreements as per our announcement to Bursa Malaysia Securities on 16 th Jan 2017 for the following: Proposed Acquisition by the Group of A&M Concrete Products Sdn Bhd, ( A&M Concrete ) and Proposed Acquisition by the Group of Show Piece Sdn Bhd,, which in turn holds 100% equity interest in Innocentral Sdn Bhd, ( Innocentral ) A&M Concrete is the registered owner of a parcel of freehold land which has been approved for development of 280 units within 3 blocks of condominium units as well as 9 units of stratified 3-storey shops in Kota Kemuning facing Bukit Kemuning Golf and Country Club. Artist impression of Amverton Greens Innocentral is the registered owner of a plot of land within Mukim and District of Klang, State of Selangor Darul Ehsan measuring 624,219 sq feet which has been approved for the development of 310 units of double storey terraced houses, and 8 units of double storey semi-detached houses and a parcel of vacant residential land. The rationale for this proposed acquisitions is to increase our land bank in Klang Valley, and furthermore these lands which have the Approved Development Order, will give us the opportunity to start developing our project immediately. In conclusion, the Proposed Acquisitions strategically fits into the Group s business strategy to expand its property division and to diversify its earnings. Artist impression of Amverton Links

13 11 Statement on Corporate Governance The Malaysian Code on Corporate Governance 2012 ( MCCG 2012 or the Code ) sets out the broad principles and specific recommendations on structures and processes which companies should adopt in making good corporate governance an integral part of their business dealings and culture. The Board of Directors has always been supportive of the adoption of the principles as set out in MCCG The Board is committed to ensure that the highest standards of corporate governance are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financial performance of the Company and the Group. This Statement sets out the manner in which the Group has applied and the extent of compliance with the principles and recommendations as set out in MCCG ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Clear Functions of the Board and Management The Group acknowledges the pivotal role played by the Board of Directors in the stewardship of its direction and operations. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for Management and monitoring the achievement of these goals. The Board is responsible for oversight of the Company. Key matters reserved for the Board s approval include the following:- Approval of financial results Declaration of dividend Annual business plan Acquisition or disposal of material fixed assets To ensure the effective discharge of its function and responsibilities, the Board has delegated specific responsibilities to three (3) sub-committees (Audit, Nomination and Remuneration Committees). The details of the Audit Committee are set out on page 22 to 23 while the details of the Nomination and Remuneration Committees are set out below. These Committees have the authority to examine particular issues and report back to the Board with their recommendations. The ultimate responsibility for the final decision on all matters, however, lies with the entire Board. The daily operations have been delegated to management. Management has been given the authority to decide on operation matters within certain set limits where quick decisions are important to the growth and success of the Group. Management is however accountable to the Board and must refer to the Board for decision where the matters are material and involves strategic decisions. Clear Roles and Responsibilities The Board provides stewardship to the Group s strategic direction and operations, and ultimately the enhancement of long-term shareholders value. The Board is primarily responsible for: Adopting and monitoring progress of the Company s strategies, budgets, plans and policies; Overseeing the conduct of the Company s business to evaluate whether the business is properly managed; Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks; Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing senior management Developing and implementing investor relations programme or shareholders communication policy for the Group; and Reviewing the adequacy and integrity of the Company s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

14 12 Statement on Corporate Governance ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (CONTINUED) Formalised Ethical Standards through Code of Ethics The Directors continue to adhere to the Company Directors Code of Ethics established which is based on principles in relation to integrity, compliance with legal and regulatory requirements and company policies and accountability in order to enhance the high standards of corporate governance and behavior. Strategies Promoting Sustainability The Board is mindful of the importance of business sustainability and, in conducting the Group s business, the impact on the environmental, social and governance aspects is taken into consideration. The Group also embraces sustainability in its operations. The Group s activities on corporate social responsibilities for the financial year under review are disclosed in the Statement on Corporate Social Responsibilities on page 28. Access to Information and Advice All Board meetings are structured with a pre-set agenda. Board papers providing updates on operation, financial and corporate developments as well as minutes of meetings of the Board Committees are provided at least three (3) days in advance to give Directors time to deliberate on the issues to be raised at the meetings. All the Directors have been granted unrestricted access to all information pertaining to the Group s business and affairs as well advice and services of the Company Secretaries in order to assist them in their decision making. Where necessary, the Directors may engage independent professionals, at the Group s expense, to advise them on specialized issues for the purpose of decision making. Qualified and Competent Company Secretary The Board is satisfied with the performance and support rendered by the Company Secretary to the Board in the discharge of its functions. The Company Secretary plays an advisory role to the Board in relation to the Company s constitution, Board s policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretary supports the Board in managing the Company s governance model, ensuring it is effective and relevant. During the year 2016, the Company Secretary attended all Board meetings and ensure that the deliberations in terms of the issues discussed and decisions made thereof, were accurately and sufficiently recorded, and properly kept for the purposes of meeting statutory regulations, Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) or other regulatory requirements. Board Charter The Board Charter is currently being drafted and will be posted on the Company s website after the Board s approval for adoption. In the course of establishing a board charter, the Board recognises the importance to set out the key values, principles and ethos of the Company, as policies and strategy development are based on these considerations. The Board Charter is expected to include the division of responsibilities and powers between the Board and management as well as the different committees established by the Board.

15 13 Statement on Corporate Governance STRENGTHEN COMPOSITION Nomination Committee The Board has established a Nomination Committee on 29 th March 2002 as it recognises the importance of the roles the Committee plays not only in the selection and assessment of Directors but also in other aspects of corporate governance which the Committee can assist the Board to discharge its fiduciary and leadership functions. The Nomination Committee comprises the following members: Mat Ripen Bin Mat Elah Dato Milton Norman Ng Kwee Leong Ooi Hock Guan (Independent/Non-Executive Director) - Chairman (Non-Independent/Managing Director) (Independent/Non-Executive Director) The terms of reference of the Nomination Committee include: Annually review the required mix of skills and experience and other qualities, including core competencies which Non-Executive and Executive Directors should have; Assess on annual basis, the effectiveness of the Board as a whole, the committees of the Board and for assessing the contribution of each individual Director, including Independent Non-Executive Directors, as well as the Managing Director; Assess on annual basis, the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. Upon completion of the nine (9) years, an Independent Director may continue to serve on the Board subject to the Director s re-designation as a Non-Independent Director. To retain as Independent Director, the Board must justify and seek shareholder s approval for a person who has serve in that capacity for more than nine (9) years; Recommends to the Board, candidates for all directorship to be filled by shareholders or the Board, including those proposed by the Managing Director or any senior executives of the Company; Recommends to the Board, Directors to fill the seats on Board Committees; and Carry out its responsibilities with the assistance and services of a Company Secretary who must ensure that all appointments are properly made, that all necessary information is obtained from Directors, both for the Company s own records and for the purposes of meeting statutory obligations, as well as obligations arising from the MMLR of the Bursa Securities or other regulatory requirements. In making its recommendations, the Nomination Committee should consider the candidates : Skills, knowledge, expertise and experience; Professionalism; Integrity; and In the case of candidates for the position of Independent Non-Executive Directors, the Nomination Committee should also evaluate the candidates ability to discharge such responsibilities/functions as expected from Independent Non- Executive Directors. The Nomination Committee held one (1) meeting during the financial year ended 31 st December During the year under review, the Nomination Committee carried out its duties in accordance with its Terms of Reference. These include: Review and assess the effectiveness of the Board as a whole and the Audit Committee; Review and assess the mix of skills, experience and competencies of each individual Director; Review and recommendation to the Board, the re-election of the Directors who will be retiring at the forthcoming AGM of the Company; and Review and recommendation to the Board, the retention of the Independent Non-Executive Directors in accordance with the MCCG 2012.

16 14 Statement on Corporate Governance STRENGTHEN COMPOSITION (CONTINUED) Develop, Maintain and Review Criteria for Recruitment and Annual Assessment of Directors MCCG 2012 endorses as good practice, a formal procedure for appointments to the Board, with a Nomination Committee making recommendation to the Board. MCCG 2012, however, states that this procedure may be performed by the Board as a whole, although, as a matter of best practice, it recommends that this responsibility be delegated to a committee. In previous years, the appointment of any additional Director was made as and when deemed necessary by the existing Board with due consideration given to the mix of expertise and experience required for an effective Board. Pursuant to its set up on 29 th March 2002, the Nomination Committee is responsible for making recommendations for any appointment to the Board. Any new nomination received is put to the full Board for assessment and endorsement. In respect of the appointment of Directors, the Company practices a clear and transparent nomination process which involves the following five (5) stages: Stage 1: Identification of candidates Stage 2: Evaluation of suitability of candidates Stage 3: Meeting up with candidates Stage 4: Final deliberation by the Nomination and Remuneration Committee Stage 5: Recommendation to the Board In accordance with the Company s Article of Association, all Directors who are appointed by the Board are subject to election by shareholders at the first Annual General Meeting after the appointment. In additions, one-third of the remaining Directors, are required to submit themselves for re-election by rotation at each Annual General Meeting. In compliance with the MMLR of Bursa Securities, which came into force on 1 st June 2002, all Directors are required to submit themselves for re-election at least once every three years. The Companies Act 2016, has now replaced the Companies Act 1965 effective 31 st January With the enforcement of the new Act, the Companies Act 1965 was therefore repealed. Previously, under section 129 of the Companies Act 1965 a Director who is over 70 years of age must retire at the Annual General Meeting of the Company, and may be re-appointed. Pursuant to new Companies Act 2016 Directors who attain the age of more than 70 years are no longer required to retire at the Annual General Meeting of the Company. The Board has no immediate plans to implement gender diversity policy. In considering Board appointment, the Board believes in and provides equal opportunity to candidates who have the necessary skills, experience, commitment (including time commitment), core competencies and other qualities regardless of gender, ethnicity and age. Nevertheless, the Board shall endeavor to support gender diversity in the boardroom as recommended by the Code as when the opportunity arises. Directors Remuneration The Company set up the Remuneration Committee on 29 th March 2002 as recommended by the Code to determine the remuneration for a Director so as to ensure that the Company attracts and retain the Directors needed to run the Group successfully. The component parts of remuneration are structured so as to link rewards to corporate and individual performance, in the case of Executive Directors. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned. The members of the Remuneration Committee, comprising a majority of Non-Executive Directors, are as follows: Mat Ripen Bin Mat Elah Dato Milton Norman Ng Kwee Leong Ooi Hock Guan (Independent/Non-Executive Director) - Chairman (Non-Independent/Managing Director) (Independent/Non-Executive Director)

17 15 Statement on Corporate Governance STRENGTHEN COMPOSITION (CONTINUED) Directors Remuneration The Remuneration Committee recommends to the Board the framework of the Executive Directors remuneration and the remuneration package for each Executive Director in all its forms, drawing from outside advice if necessary. Executive Directors should pay no part in decisions on their own remuneration. It is, nevertheless, the responsibility of the entire Board to approve the remuneration of these Directors. The determination of the remuneration of Non-Executive Directors is a matter for the Board as a whole. The individuals concerned should abstain from discussions of their own remuneration. The Company reimburses reasonable expenses incurred by these Directors in the course of their duties as Directors. The appropriate Director s remuneration paid or payable or otherwise made available from the Company and its subsidiary companies for the financial year ended 31 st December 2016 are presented in the table below: (i) Aggregate remuneration of Directors categorised into appropriate components: Received from Group and Company Executive Directors RM 000 Non-Executive Directors RM 000 Fees - 2 Salary & Allowances EPF 94 - Bonus (ii) The remuneration paid to Directors of the Company for the financial year ended 31st December 2016, in bands of RM50,000 are tabulated as follows: Number of Directors Range of Remuneration Executive Non-Executive Below RM50,000-1 RM100,001 to RM150, RM750,001 to RM800, * None of the Director s remuneration falls within the RM50,001 to RM100,000 and RM150,001 to RM750,000.

18 16 Statement on Corporate Governance REINFORCE INDEPENDENCE Annual Assessment of Independence The Board, through the Nomination Committee, assesses the independence of the Independent Non-Executive Directors annually, taking into account the individual Director s ability to exercise independent judgement at all times and to contribute to the effective functioning of the Board. The Independent Non-Executive Directors are not employees and they do not participate in the day-to-day management as well as the daily business of the Company. The Board is satisfied with the level of independence demonstrated by all the Independent Non-Executive Directors and their ability to act in the best interest of the Company. Tenure of Independent Directors One of the recommendation of the MCCG 2012 states that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. However, this do not preclude the Director from continuing to serve on the Board as an Independent Non-Executive Director, subject to strong justifications provided by the Board and approvals sought from shareholders. Rather than tenure of an Independent Non-Executive Director s service, the Board places greater emphasis on the Director s ability to exercise unbiased judgement and his contribution towards the effective functioning of the Board. As at the date of this statement, Tan Sri Dato Dr. Sak Cheng Lum and En Mat Ripen Bin Mat Elah has served tenure of nine (9) years and above. The Nominating and Remuneration Committees have assessed and are satisfied that the Directors: Are independent of the management and free from any business dealings or other relationship with the Group which may be perceived to materially interfere with their ability to exercise unfettered judgement and act in the best interest of the Group; Have committed sufficient time and exercised due care during their tenure, actively participating in board meetings and discussions; Are able to capitalize on their familiarity, insights and knowledge of the Group s operations and contribute positively towards deliberations and decision-makings of the Board; Have discharged their professional duties in good faith and in the best interest of the Group and shareholders; and Have vigilantly safeguarded the interest of minority shareholders, as well as stakeholders of the Group Shareholder s Approval for the Retention of Independent Non-Executive Director Tan Sri Dato Dr. Sak Cheng Lum and En Mat Ripen Bin Mat Elah have offered themself for re-appointment as Directors of the Company at the forthcoming forty-seventh Annual General Meeting. The Board is satisfied with the skills, contribution and independent judgement that Tan Sri Dato Dr. Sak Cheng Lum and En Mat Ripen Bin Mat Elah bring to the Board. In view thereof, the Board recommends and supports their retention as Independent Non-Executive Directors of the Company which is tabled for shareholders approval at the forthcoming forty-seventh Annual General Meeting of the Company. Separation of Position of the Chairman and Managing Director The positions of Chairman and Managing Director have always been held by different individuals. There is a clear division of responsibilities between the two roles to ensure that there is an appropriate balance of power and authority to facilitate efficiency and expedite decision making.

19 17 Statement on Corporate Governance REINFORCE INDEPENDENCE (CONTINUED) Separation of Position of the Chairman and Managing Director Currently, Tan Sri Dato Ng Boon Ng Thian Hock, a Non-Independent Executive Director, chairs the Board while the position of Managing Director is held by Dato Milton Norman Ng Kwee Leong. The Chairman is primarily responsible for ensuring the effective conduct of the Board whilst the Managing Director oversees the day to day management and running of the Group and the implementation of Board s decisions and policies. The Board notes Recommendation 3.5 of the MCCG 2012 also recommends that the Chairman of the Board to be a nonexecutive member of the Board and in the event, the Chairman is not an Independent Director, the Board must comprise a majority of Independent Directors. The Company s Chairman, Tan Sri Dato Ng Boon Ng Thian Hock, is an executive member of the Board and is not an Independent Director by virtue of his substantial interest in the Group. As the Chairman has a significant relevant interest in the Company, he is well placed to act on behalf of shareholders and in their best interest. In view of that, the Board does not recommend the necessity of nominating an Independent Non- Executive Chairman at this juncture. Board Composition and Balance The Board currently consists of four (4) Executive Directors and three (3) Independent Non-Executive Directors. The composition of the Board complies with paragraph of the MMLR of Bursa Securities. A brief description of the background of each Director is disclosed in the Profile of Directors on pages 4 to 6. The Group is led and controlled by an experience Board, many of whom have intimate knowledge of business. The management of the Group s business, implementation of policies and day-to-day running of the business is delegated to the Executive Directors. The Independent Non-Executive Directors provide unbiased and independent views to safeguard the interests of shareholders. There is balance in the Board because of the presence of three (3) Independent Non-Executive Directors who are of the caliber necessary to carry sufficient weight on Board decisions thus enabling adequate Board representation of the interest of minority shareholders. Although all the Directors have an equal responsibility for the Group s operation, the role of these Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by the executive management are fully discussed and examined, and take account of the long term interests, not only of the shareholders, but also of employees, customers, suppliers and the many communities in which the Group conducts business. En Mat Ripen Bin Mat Elah acts as the Senior Independent Non-Executive Director. Any concerns concerning the Group may be conveyed to him.

20 18 Statement on Corporate Governance FOSTER COMMITMENT Time Commitment The Board meets at least four (4) times a year, with additional meetings convened when necessary. All Board members bring an independent judgement to bear on issues of strategy, performance, resources, and standards of conduct. The Non-Executive Directors are all independent. During the year ended 31 st December 2016, five (5) Board meetings were held. Every Director attended a majority of the Board meetings held during his tenure in the period. Details of the Board meetings and the attendance of the Directors are set out on page 94. The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company. The Directors are required to submit an update on their other directorships and shareholdings to the Company Secretary. Such information is used to monitor the number of directorship held by the Directors. Each member of the Board must not hold more than five directorships in public listed companies. This is in compliance with the MMLR of Bursa Securities which states that Directors should not sit on the Boards for more than five listed companies to ensure that their commitment and have the time to focus and fulfill their roles and responsibility effectively. Directors Training As an integral element of the process of appointing new Directors, the Nomination Committee ensures that new Board members are given every opportunity to familiarise themselves with the structure, operations and types of businesses of the Group. All the Directors have attended the Mandatory Accreditation Programme conducted by Research Institute of Investment Analysts Malaysia and completed the Continuing Education Programmes ( CEP ) within the timeframe. The Board is regularly updated by the Company Secretary on the latest update or amendments on the MMLR of Bursa Securities and other regulatory requirements relating to the discharge of the Directors duties and responsibilities. The external auditors also brief the Board members on any changes to the Malaysian Financial Reporting Standards that affect the Group s financial statement during the financial period under review. The Directors will also attend training endorsed by Bursa Securities to keep abreast with developments in the capital markets. The training programme and seminars attended by Directors during the financial year ended 31 st December 2016 includes: Conference/Seminar/Workshop/Training Organiser/Venue Date Future of Auditor Reporting The Game Changer for Boardroom Risk Management Programme I am Ready to Manage Risks Enhanced Understanding of Risk Management and Internal Control for CFO, IA & RO Bursa Malaysia Berhad, Exchange Square, KL Bursa Malaysia Berhad, Exchange Square, KL Kuala Lumpur Convention Centre, KL 9 th March th August th October 2016

21 19 Statement on Corporate Governance UPHOLD INTEGRITY IN FINANCIAL REPORTING Compliance with Applicable Financial Reporting Standards The Board is committed to presenting a fair, balanced and comprehensive financial performance and prospects in all disclosures made to the shareholders and the general public. In addition to providing financial statements and annual report on an annual basis to the shareholders, the Company also presents the Group s financial results on quarterly basis via public announcements. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. Prior to the presentation of the Company s financial statements to the Board for approval and issuance to stakeholders, Audit Committee meetings were held to review the Company s financial statements in the presence of external auditors and the Group s Financial Controller. A Statements of Directors Responsibilities for preparing the financial statements is set out on page 29 of this Annual Report. The Directors are responsible for ensuring that the Company and the Group keep proper accounting records to enable the Company and the Group to disclose, with reasonable accuracy and without any material misstatement, the financial position, performance and cash flows of the Company and the Group as at 31 st December With the assistance of Audit Committee, the Board will ensure that the preparation of fair presentation and disclosure in the financial statements are in accordance with the applicable accounting standards and other regulatory requirements. The Board, through the Audit Committee, maintains a close and formal as well as transparent arrangement and relationship with the Company s external auditors in seeking professional advice and ensuring compliance with the accounting standards in Malaysia. The Audit Committee meets the external auditors without the presence of the management twice during the year under review to further discuss on the Group s audit plans, audit findings and to exchange independent views on the matters which require their attention. Annually, prior to the commencement of the audit engagement, the external auditors confirm to the Audit Committee on their independence. In addition to the above, the Board has overall responsibility for maintaining a sound system of internal controls, which encompasses financial, operational, and compliance controls and risk management necessary for the Group to achieve its corporate objectives within an acceptable risk profile. These controls can only provide reasonable but not absolute assurance against material misstatement, loss or fraud. The Board recognises that risk cannot be fully eliminated. As such, the systems, processes and procedures being put in place are aimed at minimizing and managing them. Ongoing reviews are continuously carried out to ensure the effectiveness, adequacy and integrity of the system of internal controls in safeguarding the Company s assets. In assessing the adequacy and effectiveness of the system of internal control and accounting control procedures of the Group, the Audit Committee reports to the Board its activities, significant results, findings and the necessary recommendations or changes. Assessment of Suitability and Independence of External Auditors The scope of the external auditors is ascertained by the Audit Committee, with a twice-a-year meeting held between the Audit Committee and the external auditors. Further information is found at the Audit Committee Report at pages 22 to 23.